High Court Rejects MoD Bid to Use Privileged Costs Schedules in Hearing Loss Claims

What did the Costs Judge decide?

In Ian Henderson and Jonathan McPherson v Ministry of Defence [2026] EWHC 2645 (SCCO), Costs Judge Whalan determined a preliminary issue arising from two linked detailed costs assessments. The judgment was handed down on 16 October 2026 following a hearing on 22 July 2026.

The court considered whether informal costs breakdowns sent by the claimants’ solicitors had without-prejudice status and, if so, whether the Ministry could rely on them under the exception for “unambiguous impropriety”. The judge concluded that the documents were privileged and that the exception had not been established.

What were the costs disputes about?

The underlying claims were brought by Ian Henderson and Jonathan McPherson for deafness said to have been sustained during military service. They formed part of a much larger group of noise-induced hearing loss claims against the Ministry of Defence.

From around January 2020, Hugh James, acting for the claimants, and solicitors for the Ministry used an informal process under which a claimant would provide a without-prejudice schedule of costs and disbursements. The aim was to encourage an early payment of 50% on account and reduce the need for applications for interim payments. The Ministry increasingly used some schedules as a starting point for negotiations over the final costs liability.

In the first claim, the schedule totalled £44,939.52, while the later bill totalled £43,813.29 including the cost of preparing and checking the bill. In the second, the schedule totalled £162,601.36 and the later bill totalled £143,117.35, again including bill-preparation costs. The Ministry relied on the differences to support its challenge.

1. Around January 2020 An informal protocol for costs breakdowns and payments on account begins.
2. 19 August 2022 The second claimant’s claim settles, with costs to be assessed.
3. 12 May 2023 The first claimant’s action settles, with reasonable costs payable on the standard basis.
4. Around August 2024 The informal protocol is abandoned after the Ministry raises concerns about discrepancies between schedules and bills.
5. 16 October 2026 Costs Judge Whalan delivers the preliminary judgment.
6. 25–29 January 2027 The detailed assessment was listed to continue.

Why did the Ministry of Defence challenge the schedules?

The Ministry argued that the substantial differences between the initial schedules and the formal bills suggested that the schedules had included costs that were not properly recoverable. It said that presenting inflated schedules could induce a paying party to settle at a higher level and could amount to misconduct under CPR 44.11.

It sought permission to put the schedules before the detailed assessment judge, contending that the alleged conduct amounted to unambiguous impropriety. The Ministry also relied on earlier decisions in which inaccurate or substantially exaggerated costs schedules had led courts to disapply privilege.

The claimants denied that the schedules overstated costs actually incurred. They said the schedules were summaries extracted from their case-management system, intended principally to support interim payments rather than to represent certified bills or a final position on inter partes recoverability. They explained that the later bills were prepared by external costs lawyers, who exercised professional judgment and removed or reduced items considered repetitive, administrative, excessive or disproportionate.

Why was without-prejudice privilege maintained?

Costs Judge Whalan emphasised that the without-prejudice rule protects candid settlement discussions and that the exception for unambiguous impropriety is deliberately difficult to satisfy. A difference between a without-prejudice statement and a party’s later open position is not, by itself, enough; the evidence must demonstrate an abuse of the privilege.

On the evidence, the judge was satisfied that the schedules claimed costs the claimants had actually incurred. The later reductions reflected decisions about which items to pursue in the formal bills, rather than proof that the original schedules had been deliberately or fundamentally inflated. The second claimant’s schedule did include costs relating to an unsuccessful disclosure application, but the judge accepted this as an isolated genuine error that was corrected in the subsequent bill.

“The Defendant’s case falls a long way short of demonstrating unambiguous impropriety.”

— Costs Judge Whalan, summarising the conclusion of the judgment

The judge did criticise aspects of the process. He considered that the schedules could have been rationalised more carefully and that the claimants’ solicitors could have alerted the Ministry when it became apparent that the schedules were being used in substantive costs negotiations, particularly where duplication or disproportionality might arise. However, those criticisms did not establish fundamental calculation errors or misrepresentation sufficient to remove privilege.

What does the judgment mean for costs disputes?

The ruling confirms that differences between an informal costs schedule and a later formal bill do not automatically justify disclosure of without-prejudice material. The court will examine what the documents were intended to do, whether they represented costs actually incurred, and whether the evidence meets the demanding threshold for the impropriety exception.

For solicitors, the judgment also highlights the practical importance of explaining the purpose and status of informal costs information, checking schedules carefully and making clear when a document is intended to support an interim payment rather than a final settlement of recoverable costs.

The decision resolves the preliminary privilege issue only. The detailed assessment proceedings were listed to continue from 25 to 29 January 2027, with any further interlocutory implications to be considered if necessary.